The world’s No. 3 economy contracted at an annualized rate of 1% in January-March from the previous quarter.
Japan’s economy shrank for the first time in two quarters in the first three months of the year as COVID-19 restrictions hit the service sector, and the war in Ukraine and soaring commodity prices created shock waves. New headaches for consumers and businesses.
The drop poses a challenge to Prime Minister Fumio Kishida’s efforts to achieve growth and wealth distribution under his “new capitalism” agenda, raising concerns about inflation stagnation – a combination of muted growth and rising inflation.
The gross domestic product (GDP) figures for the world’s third-largest economy shrank at an annualized rate of 1% in January-March from the previous quarter, compared with a 1.8-percent decline. % that economists. Cabinet Office data showed a quarterly decline of 0.2% compared with market forecasts for a 0.4% decline.
The data showed that private consumption, which accounts for more than half of the economy, fell slightly, compared with the 0.5 percent decline economists had predicted.
Weak reading could pressure Kishida to spend more when the upper house elections take place on July 10, after 2.7 trillion yen ($20.86 billion) in additional budget spending. compiled on Tuesday.
Many analysts expect the Japanese economy to recover in the coming quarters, but the war in Ukraine and the slowdown in China’s economy have dimmed the outlook for a recovery.
Although coronavirus restrictions have been eased, doubts remain about a V-shaped recovery, while a rise in energy and food prices due to a weak yen may limit domestic demand.
Japan’s export-dependent economy received little help from external demand, with net exports falling 0.4 percentage points from GDP growth, driven by a weak yen and global commodity prices. Increased demand has increased imports.
This compares with the negative contribution of 0.3 percentage points that economists have seen.
Investment spending rose 0.5 percent from an expected 0.7 percent increase, following a 0.4 percent gain in the previous quarter.
